Formula for Sourcing Success
Most global organizations today do not invest sufficiently in internal preparation for sourcing arrangements, according to Forrester Research’s report cited earlier. Cost savings initially associated with outsourcing are often lost to the complexities of inadequate sourcing management.
Despite the findings by Gartner that 50% of all the projects involving external service providers are considered unsuccessful, there are steps that organizations can take to improve vendor management and achieve better results. Delivering a variety of skills training to project and contract managers on sourcing teams and investing time early in the sourcing process to define communication channels are key steps every organization can and should take to improve sourcing outcomes.
To reap the benefits of outsourcing, companies must alter their internal processes, adjust their expectations and hone their employees’ skills and responsibilities, according to Stephanie Moore of Forrester Research. “Organizations that neglect such internal preparation will not achieve the savings or efficiencies available in sourcing relationships,” says Moore.
In conclusion, the hallmarks of a solid sourcing strategy include: Clearly defined roles and responsibilities among team members, mastery of skills and knowledge associated with each phase of a contract, thorough understanding of the processes, cross-functionality and clear communication channels.
With these elements in place, global organizations can achieve sourcing success as measured by increased profitability, fewer contract delays and cost overruns, improved quality of contract deliverables, increased customer satisfaction, greater flexibility and reduction in the total number of vendors.
Three Cs of Vendor Management
To realize a significant return on sourcing investment and to improve sourcing results, specific actions and behaviors must be implemented in the areas of competence, collaboration and communication.
Competence. Developing individual and organizational competencies that pertain to sourcing management can be separated into three fundamental areas: Project management, contract management and business analysis. These competencies must be cultivated in team members, further to which cross-competencies must be developed so that those individuals can communicate more effectively and understand how they fit into the broader picture of organizational sourcing success.
Collaboration. Providing training with the larger corporate strategy in mind fosters collaboration, and that spirit of collaboration should extend to the sometimes antagonistic relationship between the buyer and seller. It is vital to ensure that each side’s objectives are aligned, for both short and long term outcomes. One way to foster collaboration, both within the buyer’s sourcing team and between the buyer and seller, is through joint risk management, very early in the sourcing process — preferably during contract negotiation. Together, the parties should define a mutually acceptable approach to risk — a process that requires some candor on the part of both the buyer and seller. The resulting collaboration is well worth that effort.
Communication. Considering the globally dispersed operations of most organizations, cultural differences among vendors and competing goals, clear communication is undoubtedly crucial for success. Consistency in a communications approach, from the earliest stage of the contract to its final hours and during all stages, is critical.
Unambiguous contract requirements must be defined, clear expectations set and specific parameters for information flow established to meet the needs of each party in the sourcing relationship. These details must be meticulously spelled out in advance.
All stakeholders must be included in the communications plan and guidelines must be established to outline the exchange of all data and information relating to each stage of the sourcing process.
Clearly defined channels of communication, along with competencies and a collaborative environment established at the outset of a sourcing relationship, go a long way toward ensuring success in the project.
